1. These are the appeals filed by the Revenue against the order of the CIT(A) -II, Rajkot, dt. 25th Nov., 2004 for asst. yrs. 1999-2000, 2000-01 and 2001-02.
2. The only issue involved in these three appeals is whether the income from warehousing should be assessed as business income as returned by the assessee, or as income from house property as assessed by the AO.Since the main issue is identical in all these three appeals, they are disposed of by this consolidated order, 3. The brief facts of the case are that during the course of assessment under Section 143(3) r/w Section 147, the AO observed that in the return of income, the assessee- firm has mentioned the nature of business as general merchant and warehousing charges and JCB Loader hire charges. He contended that income from warehouse is income from house property. According to him, it makes no difference whether the objective is to carry on business or get rental income. He has contended that there is no business like warehousing. The AO has referred to various TDS certificates issued by the parties from whom the warehousing charges were received where they have deducted tax at source under Section 194-I applicable to rent. According to the AO, this reveals the nature of payments. As regards the assessee's contention that the entire godowns had not been given for exclusive possession but space had been let out as per the requirements of the parties, the AO has contended that it does not make any difference.
According to the AO, it does not make any difference whether property is let out for use or given for exclusive possession and whether property is given on some fixed rent or whether the charges vary from time-to-time. As regard the assessee's contention that they have provided various services such as lighting, telephone, watch and ward staff for managing loading and unloading, the AO has contended that in a house property, there is a responsibility of the owner to provide all the facilities. The AO has also contended that it makes no difference whether rent is charged on the basis of square feet occupied and whether the warehouse is constructed as unique building.
4. By the impugned order, the CIT(A) allowed the assessee's claim for treatment of income from warehouse business as 'business income' by observing that the assessee is engaged in the warehousing business.
This emanates not only from the partnership deed but also from the nature of the activity actually carried out. The AO has not disputed the fact that the assessee rents out parts of the warehouse premises to various business units, charges rent on the basis of area occupied, takes insurance for the building, possesses the key, provides various services such as lighting, telephone, security and management of loading and unloading, etc.
5. We have considered the rival contentions, carefully gone through the orders of lower authorities and deliberated upon the case laws cited by the learned Authorised Representative and Departmental Representative at Bar, and also the case laws discussed by the lower authorities in their respective orders, with reference to factual matrix of the instant case. From the record, we found that the assessee was providing storage facilities measured in square feet on specific charges for specific period to various customers. Thus, the assessee has contractual obligation for providing different area of godowns to different persons at different time for specific period having specified charges on the basis of prevailing market rate. We also found that in addition to space in warehouse the assessee has provided service to its customers like electricity, telephone, watch and ward, etc. As per the terms of letting out space in the warehouse to the customers they had no right of occupancy and in the municipal records also, none of these persons were occupant. Furthermore, the keys of the warehouse were with the assessee and the godowns were also insured by the assessee, meaning thereby the godowns were fully in control of assessee. We also found that before the lower authorities, the assessee also produced the details of period-wise warehousing receipts, copies of warehousing bills and also details of electricity and telephone expenses, property tax details, etc.
6. As per our considered view, merely because income is attached to immovable property, it cannot be the sole factor for assessment of such income as 'income from house property'. What has to be seen is what was the primary object of the assessee while exploiting the property. If it is found, applying such, decisions that main intention is for letting out of property or any portion thereof, the same must be considered as rental income or 'income from house property1. In case it is found that the main intention is to exploit the immovable property by way of commercial activities, in that event it must be held as 'business income'. In the instant case, we found that services rendered by the assessee were the result of its activities carried on continuously in an organized manner with a set purpose and with a view to earn profit.
Hence, all these activities were in the nature of adventure in the nature of trade, therefore, liable to be assessed as business income and not as income from house property. Whether a particular letting is business has to be decided in the circumstances of each case. Each case has to be looked at from businessman's point of view to find out whether the letting was doing of a business or the exploitation of his property by the owner. A thing cannot by its very nature be a commercial asset. A commercial asset is only an asset used in business and nothing else and business may be carried on with practically all things. Therefore, for ascertaining the income accruing from such asset, not only intention of the parties is to be seen but also the terms and conditions for which the asset is given for use. In the instant case, asset involved is warehouse and the commercial use is the only use which is possible and the resultant income as a natural corollary has to. be assessed under the head 'income from business' and not 'income from house property'. While deciding whether the assessee dealt with its property as an owner or as a businessman or a prudent man of commerce, one must see not the form which he gave to the transaction but to the substance of the matter. It will be essential to find out the user of the property and the character in which property is used. Ownership of property and leasing it out may be done as a part of business or it may be done as a land owner, Whether it is the one or the other must necessarily depend upon the object with which the act is done. If the dominant object of the leasing out is incidental to and for the purpose of assessee's business, income would be business income. What, was to be discovered is whether property is subservient to the main business of the assessee.
7. From the record we also found that in the asst. yr. 1995-96, a revision proceeding initiated under Section 263 was dropped by the CIT on the ground that warehousing income was business income and the partners of the assessee-firm were, therefore, eligible for remuneration on the basis of income/profit of warehouse. Furthermore, in the asst. yr. 1996-97, in an order passed under scrutiny assessment under Section 143(3), the AO allowed assessee's claim for business income in respect, of income generated on providing space in the warehouse. Furthermore, in the asst. yr. 1998-99 also, the warehouse income was accepted by the Department under Section 143(3) as business income. There is no dispute to the fact that strict rule of doctrine of res judicata does not apply to the proceedings under the IT Act, but at the same time it is equally true that unless there is a change in circumstances, the IT authorities will not depart from the previous decisions at their sweet will, in the absence of material circumstances or reasons for such departure. Thus, the rule of consistency which applies to the income-tax proceedings has to be followed. The Hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT observed that if there is no change in the facts, a different conclusion was not warranted by the income-tax officials.
Furthermore, Delhi High Court in the case of CIT v. Neo Poly Pack (P) Ltd. , observed that doctrine of res judicata does not apply to the income-tax-proceedings since each assessment year is independent of other, but where an issue has been decided consistently in a broad manner for earlier assessment year, for the sake of consistency, the same view should continue in the subsequent years unless there is material change in the facts.
8. In the instant case, we found that Department itself in the earlier years, had accepted the facts under scrutiny assessment that the warehousing income was its business income, the CIT also under Section 263 dropped the proceedings for asst. yr. 1995-96 and agreed with the conclusion by the AO that warehousing income was business income, therefore, eligible for distribution of remuneration among the partners of the firm. Applying the principle of consistency hereinabove above, we do not find any merit in the action of AO for changing its conclusion during the year under consideration without any change in the facts and circumstances as compared to the earlier years.
Undisputedly in the instant case, the assessee was deriving business income from the regular and systematic activity carried on in an organized way in the field of "warehousing". As per the terms of the partnership deed, one of the businesses to be carried on by the assessee-firm was warehousing, the assessee was providing services like electricity, telephone, watchman, staff for managing loading and unloading of goods and keeping a watch on these goods stored in the warehouse along with other services required from time-to-time by the concerned customers, Furthermore, the frequency of transactions for the hire charges received by the assessee give ample indication and evidence for the entire activity was in the nature of business activity. As per the nature of property also, it was only capable of commercial use. Therefore, the resultant income as a natural corollary is under the head 'income from business' and not as the 'income from house property'. The balance sheet of the assessee-firm also shows godown as "business asset" and not as assets of any personal investments. Income is to be classified and taxed in the hands of recipient as per different heads of income as per provisions of Section 14 of IT Act, irrespective of head under which the person making the payment books such expenditure/payment in its books of account or the nature of treatment given by him. Meaning thereby, nature of payment and head of income is not necessarily required to be the same in the hands of recipient of income and payer of income. In the instant case, even though the customers making payment to the assessee had booked the expenditure in their books of account under the head rental expenditure/payment and deducted TDS thereon under Section 194-I, yet the income so received is assessable in the assessee's hands as income from business "and not" as income from rent or income from house property. As per our considered view for deciding the nature of income, no general principle can be laid down which is applicable to all the cases, these cases have to be decided on its own merits, facts and circumstances. In each case, what is to be seen is whether the asset is being exploited commercially by letting out or whether it is being let out for the purpose of enjoying the rent. The distinction between the two is narrow and one has to depend on certain facts peculiar to each case. Thus, in the instant case, the entire activity systematically undertaken by the assessee since years together is adventure in the nature of trade, therefore, liable to be assessed as 'business income' and not as 'income from house property'. We are, therefore, inclined to agree with the contentions of learned Authorised Representative, Mr.
D.H. Vadodaria, chartered accountant, that pure and simple commercial assets like machinery, plant, tools, industrial assets and godowns having high business potential stand on a different footing from the assets like land and building. The hire charges income of such godowns has to be taxed under Part 'D' of Chapter IV of IT Act, as "income from business" rather than income from house property.
9. As we have already decided the issue on merits, there is no need to go into the technical aspect of reopening under Section 147. In the result, all the appeals of Revenue are dismissed.